Aviva shares nosedive thanks to slashed dividend

Investors have fled from Aviva shares today after the insurer decided to cut its dividend by more than 25%.

by Michael Northcott
Last Updated: 19 Aug 2013

If you’re an income investor, today is not the day to buy Aviva. The insurer has announced a post-tax loss of £3bn in its full-year results, and simultaneously announced that shareholders will get 19p per share, a drop of more than a quarter  compared with 26p last year.

The firm’s chief executive, Mark Wilson, said that the losses were caused by write-downs pertaining to the sell-off of its US operation, which was agreed last year. He joined as chief in January after his predecessor Andrew Moss found himself the subject of a shareholder uprising – investors were miffed at his level of pay versus what they perceived to be poor performance.

Wilson said: ‘2012 was a year of transition at Aviva. [It] has many strengths to build on. My intention is that Aviva will be a simpler business with a robust balance sheet that delivers sustainable cash-flows and growth.’

So what is Aviva planning to do with the cash saved from a pared-down divi? It says that it will pay down some of the company’s huge debts as well as building up a cash pile to provide some security for the firm going forward. 

It insists that since beginning its new recovery plan in 2012, it has raised more than £2bn (partly by flogging the less profitable parts), and that shares have risen by more than a third on aggregate in that time.

So the insurance business isn't quite the license to print money that that bloke down the pub would have you believe...


Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today